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Government-Industry Partnerships for the Development of New Technologies Executive Summary This summary report reflects the findings and recommendations of a comprehensive program-based review of public-private partnerships. The study was conducted under the auspices of the Board on Science, Technology, and Economic Policy of the National Research Council, with the help of numerous national and international experts. The Committee’s analysis has included a significant but necessarily limited portion of the variety of cooperative activity that takes place between the government and the private sector in the United States and abroad.1 It has focused on “best practices” as a way of drawing out positive guidance for future public policy. Public-private partnerships, involving cooperative research and development activities among industry, universities, and government laboratories can play an instrumental role in accelerating the development of new technologies from idea to market. Experience shows that partnerships work—thereby contributing to national missions in health, energy, the environment, and national defense—while also contributing to the nation’s ability to capitalize on its R&D investments. Properly constructed, operated, and evaluated partnerships can provide an effective means for accelerating the progress of technology from the laboratory to the market. 1 For example, aside from SEMATECH (where DARPA served as the government partner) and broader references to DARPA’s role in the development of the Internet, DARPA’s programs and contributions have not been specifically reviewed. For an overview of the scope of cooperative activity at the federal and state levels, see C. Coburn and D. Berglund, Partnerships: A Compendium of State and Federal Cooperative Technology Programs, Columbus, OH: Battelle Press, 1995; and the RaDiUS database. See <http://www.rand.org/services/radius/>.
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Government-Industry Partnerships for the Development of New Technologies Bringing the benefits of new products, new processes, and new knowledge into the market is a key challenge for an innovation system. Partnerships facilitate the transfer of scientific knowledge to real products; they represent one means to improve the output of the U.S. innovation system. Partnerships help by bringing innovations to the point where private actors can introduce them to the market. Accelerated progress in obtaining the benefits of new products, new processes, and new knowledge into the market has positive consequences for economic growth and human welfare. The case of the semiconductor industry illustrates that partnerships have also contributed directly to furthering the global competitiveness of U.S. industry. Partnerships are diverse in structure, mechanisms, and goals. This is one of their advantages. Partnerships as diverse as the Small Business Innovation Research program (SBIR) program, the Advanced Technology Program (ATP), and SEMATECH have all demonstrated positive results commensurate with their challenges and objectives. Indeed, the partnership concept is wider than a “one size fits all” solution to the challenges of technology development. Flexibility and experimentation are key elements in effective policymaking for public-private partnerships. Successful partnerships tend to be characterized by industry initiation and leadership, public commitments that are limited and defined, clear objectives, cost sharing, and learning through sustained evaluations of measurable outcomes, as well as the application of the lessons to program operations.2 At the same time, it is important to recognize that although partnerships are a valuable policy instrument, they are not a panacea; their demonstrated utility does not imply that all partnerships will be successful. Indeed, the high risk—high payoff nature of innovation research and development assures some disappointment. Partnerships focus on earlier stages of the innovation stream than many venture investments, and often concentrate on technologies that pose greater risks and offer broader returns than the private investor normally finds attractive.3 Moreover, the limited scale of most partnerships—compared to private institutional investments—and their sunset provisions tend to ensure early recourse to private funding or national procurement. In terms of project scale and timing in the innovation process, public-private partnerships do not displace private finance. Properly constructed research and development partnerships can actually elicit 2 Features associated with more successful partnerships are described in the Introduction to this report. 3 Some programs also support broadly applicable technologies that, while desirable for society as a whole, are difficult for individual firms to undertake because returns are difficult for individual firms to appropriate. A major example is the Advanced Technology Program.
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Government-Industry Partnerships for the Development of New Technologies “crowding in” phenomena with public investments in R&D providing the needed signals to attract private investment.4 The Committee’s study highlights the need to provide support for basic and applied research across a broad range of disciplines, especially in relatively neglected disciplines such as physics, chemistry, mechanical, and electrical engineering. These disciplines underpin continued advances in information technology, a major source of economic growth. They are also essential for continued progress in health. Capitalizing on the nation’s substantial investments in biomedicine requires complementary investments in often seemingly unrelated disciplines supporting information technology. Partnerships offer a means to integrate the diverse participants in the U.S. innovation system.5 Partnerships provide an institutional structure with financial and policy incentives within which companies, universities, national laboratories, and research institutes can cooperate to accelerate the development of promising technologies. Partnerships are also a versatile means of achieving pressing national objectives. In times of national need, such as the current struggle with terrorism, partnerships can be an effective means to accelerate the development of the technologies required to meet new requirements for security in areas such as health and transportation. Partnerships have a demonstrated capability to marshal national expertise from industry, government, and universities to help meet national needs.6 Programs such as the SBIR and ATP offer proven mechanisms for ad- 4 David, Hall, and Toole survey the econometric evidence over the past 35 years. They note that the “findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the ‘experiment(s)’ that the investigators envisage is not adequately specified.” It seems that both crowding out and crowding in can occur. The essential finding is that the evidence is inconclusive and that assumptions about crowding out are unsubstantiated. The outcome appears to depend on the specifics of the circumstance, and these are not adequately captured in available data. See Paul A. David, Bronwyn H. Hall, and Andrew A. Toole, “Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence.” NBER Working Paper 7373, October 1999. Relatedly, Feldman and Kelley cite the “halo effect” created by ATP awards in helping firms signal their potential to private investors. See Maryann Feldman and Maryellen Kelley, “Leveraging Research and Development: The Impact of the Advanced Technology Program,” in National Research Council, The Advanced Technology Program, C. Wessner, ed., Washington D.C.: National Academy Press, 2001. 5 See Richard Nelson, National Innovation System, New York: Oxford University Press, 1993. 6 See National Research Council, Making the Nation Safer, The Role of Science and Technology in Countering Terrorism, Washington D.C.: National Academy Press, 2002. This report notes that “for the government and private sector to work together on increasing homeland security, effective public-private partnerships and cooperative projects must occur. There are many models for government-industry collaboration—cooperative research and development agreements, the NIST Advanced Technology Program, and the Small Business Innovative Research program, to cite a few” (p. 359).
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Government-Industry Partnerships for the Development of New Technologies vancing the development of new technologies to address national missions.7 Because they are flexible and can be organized on an ad hoc basis, partnerships are an effective means to rapidly focus diverse expertise and innovative technologies to help counter new threats. 7 The National Institute of Allergies and Infectious Diseases at the National Institutes of Health, for example, has rapidly expanded its efforts in support of research on possible agents of bio-terrorism in response to recent threats and attacks. Specifically, NIAID has expanded research to develop countermeasures—including vaccines, therapeutics, and diagnostic tests—needed to respond and control the release of agents of bio-terrorism. An important tool in this effort has been the SBIR program. See NIAID FY 2003 Budget Justification Narrative at <http://www.niaid.nih.gov/director/congress/2002/cj/>.
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